Cambricon hits 1 trillion yuan market cap, issues risk warning on 369x P/E

China's AI chip leader became the first STAR Market stock to surpass 1 trillion yuan in market value, then immediately warned investors its valuation has detached from fundamentals.

Cambricon's board warned investors June 30 that its shares, trading at 369 times trailing earnings, face "downside risk from excessive short-term gains" — a rare self-correction after the stock hit 1.01 trillion yuan in market cap. The stock closed at 1,595.55 yuan after touching 1,613 yuan intraday.

"The company is still in a phase of ongoing development and has relatively limited ability to withstand market volatility and industry changes," the board said in a stock exchange filing.

At 368.97x P/E and 77.88x book value, Cambricon trades at roughly 5 times and 10 times the respective averages for the computer and electronics manufacturing sector, according to China Securities Index Co. data cited in the filing. The disparity is even starker against the software and information technology services industry, where the mean P/E stands at 74.13x and P/B at 5.67x.

The warning comes as state media outlet CCTV flagged three risks: valuation correction if earnings disappoint, a technology gap versus global leaders in high-end training hardware, and capital overheating that could fuel copycat competition. For investors, the question is whether Cambricon's first quarterly net income — 10.1 billion yuan in the three months through March — justifies a valuation that prices in years of uninterrupted growth.

Revenue Surged, but Margins Face Pressure

Cambricon posted 28.85 billion yuan in first-quarter revenue and 10.13 billion yuan in net profit attributable to shareholders. Non-GAAP net profit jumped 238.56 percent year over year to about 9.34 billion yuan, and cash flow turned positive for the first time. Yet the company cautioned that gross margins could fluctuate because of product mix shifts, rising raw material and packaging costs, and intensifying competition.

As a fabless chip designer, Cambricon relies on external partners for intellectual property licensing, wafer fabrication and chip packaging — a supply chain structure that leaves it exposed to rising upstream costs. The board warned that if raw material prices continue to climb, the impact on operating results "could be material."

Competition Heats Up as AI Chip Race Intensifies

The AI chip market remains fluid, with no single architecture or software ecosystem having established a dominant position, the company said. Both established integrated-circuit giants and a wave of startups are pouring resources into AI accelerators, squeezing margins and accelerating product cycles.

CCTV's commentary noted that domestic AI chips still trail global leaders in high-end large-model training hardware and developer ecosystem maturity — a gap that separates "usable" from "truly competitive." Nvidia's H100 and B200 GPUs, built on TSMC's 4nm and 3nm processes respectively, remain the benchmark for hyperscale training workloads, while Cambricon's offerings target inference and edge deployments where the performance delta is narrower.

Goldman Sachs and Morgan Stanley have maintained bullish stances on Cambricon, citing dense order deliveries from major internet customers and improving supply chain stability. But at 369x earnings, any delivery miss or customer concentration risk could trigger a sharp re-rating. The stock's trillion-yuan milestone has made it a bellwether for China's semiconductor ambitions — and a lightning rod for the debate over how much premium investors should pay for domestic AI chip exposure.

This article is for informational purposes only and does not constitute investment advice.